Germany to extend tax incentives for plug-in cars


German Federal Finance Minister Olaf Scholz has announced a significant extension of tax incentives for electric cars and plug-in hybrids as company cars in Germany. The 0.5% rule came into force at the beginning of this year is expected to have an effect beyond 2021, the initial end date.

Germany’s Finance Minister envisages that the 0.5% rule will be extended “perhaps for the whole next decade”. Also, Scholz is also considering an extension to delivery vans with electric drive.

What is more, the Ministry is moving away from lesser electrified cars so that plug-in hybrids should only be subsidised in future if they can “travel a longer distance electrically than today, for example, 80 kilometres”, the Finance Minister insisted. The minimum requirements from the Electric Mobility Act (EmoG) currently apply to vehicles able to drive at least 40 km electrically or emit a maximum of 50 g CO2/km. Environmental organisations had criticised the rule before, saying that it had benefits for the least environmentally friendly EVs, particularly heavy hybrids. The new WLTP test procedure is decisive for the evaluation.

“Half of all cars sold in Germany are company cars,” Scholz noted with regard to the effectiveness of tax incentives, according to Reuters. The financial benefit of private use of a company car was initially taxed at a flat rate of 1 per cent of the gross list price per month. From January, this rate has been reduced to 0.5 per cent for BEVs, PHEVs and FCEVs. As a result, in most cases, e-company cars gain a tax advantage over vehicles with internal combustion engines.

The potential extension of the 0.5% tax break is one thing, that of the “Umweltbonus”, Germany’s plug-in grant, another: Only a few days ago it became known that the government also intends to extend the latter subsidy. The environmental bonus is a subsidy of 4,000 euros for the purchase or leasing of pure battery electric vehicles and fuel cell vehicles and 3,000 euros for plug-in hybrids.

In an article in the German newspaper, Welt, a spokesman for the Federal Ministry of Economics confirmed considerations to extend the environmental bonus beyond June 2019. The responsible ministries were “basically in agreement on the question of the extension”. In cities with high air pollution, the premium could even be higher in the future, according to information from the newspaper.

Although government subsidy and tax schemes have helped boost sales in Germany, electric cars still only figured 1 per cent of new car registrations last year, according to the KBA motor vehicle authority. The German government acknowledged that it is likely to miss its target of achieving one million electric vehicles on the road by 2020 by two years. Demand for electric cars is significantly higher but currently cannot be fully met because of a lack of model diversity and available quantities.

Additional reporting by Nora Manthey.


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